Halfords shares have surged after the company exceeded analyst forecasts to deliver a £44m profit, signalling that the motoring and cycling retailer's transformation is gathering momentum. The FTSE 250 business recorded a £43.6m pre-tax profit in the year to April, bouncing back from last year's £30m loss, as turnover climbed five per cent to £1.8bn. Shares leapt 14 per cent on Thursday morning to 205p.
Profit Beats Expectations
City analysts had predicted the firm would post £40.3m in profit before tax, while the company's own guidance pointed towards the upper end of a £41.2m ceiling. The strong performance was driven by growth in motoring services and a rebound in bicycle sales.
Motoring Services Drive Growth
Under new chief executive Henry Birch, Halfords has been expanding its motoring division, which is now eclipsing retail revenues. Turnover in Halfords' autocentre operations rose by six per cent on a like-for-like basis to £740m. The company said its repairs services are accelerating, with the UK's ageing vehicle fleet identified as a key growth opportunity. The robustness of repairs activity more than offset ongoing weakness in the tyres market.
Duncan Ferris, an analyst at Freetrade, said the firm is finding growth in keeping Britons' ageing cars on the road, noting that 43 per cent of cars are 10 or more years old.
Retail Division Performs
Halfords reported it has bucked a subdued consumer environment to post a four per cent like-for-like rise in revenue, reaching £1bn, at its retail division. Bicycle sales spearheaded this growth, climbing 6.4 per cent, indicating the segment is finding its footing again following the pandemic-driven boom and bust. During the pandemic, bike sales soared, but the company has since struggled to replicate those figures.
Cautious Outlook
Despite the positive results, Ferris cautioned that profits in the retail business remain under pressure as inflation and reinvestment offset the impact of positive sales momentum. The company's share price peaked at 430p in June 2021 but had lost nearly 60 per cent of its value in five years before Thursday's update.
Leadership Changes
Last April, Halfords announced the abrupt exit of CEO Graham Stapleton, who had led the business for seven years. Henry Birch, former chief executive of Very and William Hill, was named as his replacement on the same day. Birch said: These are early days in our growth strategy and there is much still to do as we seek to leverage Halfords' clear strengths: leading market positions, an unmatched physical and digital presence in motoring and cycling, a trusted brand, and a unique services proposition.
The firm also revealed that former EY partner Jock Lennox will join its board as chair, taking over from Keith Williams, whose exit was confirmed in November. Halfords was established as a wholesale ironmongery in 1892 before growing its cycling and motoring retail operations and has been listed on the London Stock Exchange since 2004.
